Dollar Edges Up Against Shekel as Markets Await US Inflation Data
Translated & summarized from Calcalist by baba
The dollar strengthened slightly against the Israeli shekel on Wednesday, trading at 3.070 shekels, while major global currencies saw mixed movements. Traders are closely watching for the release of US inflation data and statements from Federal Reserve officials for clues on future interest rate policy. Analysts expect the US CPI to show an acceleration in both monthly and annual inflation, with potential implications for the Fed's next monetary policy decision. The market currently anticipates a high probability of the Fed holding rates steady in its upcoming meeting.
The story in 5 lines · by baba
- The dollar rose 0.1% against the Israeli shekel to trade at 3.070 shekels.
- Global markets await US inflation data and Federal Reserve officials' speeches for interest rate clues.
- US CPI is forecast to show an acceleration in inflation, potentially impacting Fed policy.
- Traders see a 77% probability of the Fed keeping interest rates unchanged at its next meeting.
- Investors have scaled back expectations of an immediate Federal Reserve interest rate hike.
The Israeli currency market saw minor fluctuations on Wednesday, with the dollar strengthening against the shekel while the euro and pound remained largely unchanged. Internationally, the dollar weakened against major currencies as traders awaited new signals on interest rate hikes aimed at combating persistent inflation. The dollar rose 0.1% to trade at 3.070 shekels, the euro saw a slight decrease to 3.442 shekels, and the pound held steady at 4.075 shekels.
Globally, the euro gained 0.1% to $1.121, the pound climbed 0.2% to $1.327, and the dollar weakened 0.1% against the yen, trading at 158.16 yen. The dollar index, measuring its value against a basket of major currencies, fell 0.1% to 101.89 points. The US currency retreated from a 1.5-year high reached the previous day, influenced by falling oil prices and a reassessment by investors of the artificial intelligence rally that had boosted demand for American assets.
Attention is now focused on the upcoming release of the US Consumer Price Index (CPI) for September and speeches from Federal Reserve officials, which could provide clarity on the interest rate outlook. The US CPI, due at 3:30 PM Israel time, is forecast to have risen 0.6% month-over-month and 3.6% year-over-year, an acceleration from August's figures. These data, released against a backdrop of high oil prices and rising gasoline costs, may offer clues about the Fed's future interest rate policy.
A higher-than-expected inflation reading could reinforce expectations of prolonged high interest rates, while a milder outcome might ease concerns about price pressures. "The risk is that the core index surprises to the upside due to strong consumer demand and higher costs, increasing the probability the market assigns to a Fed rate hike in October and the dollar exchange rate," wrote Carol Kong, a currency strategist at Commonwealth Bank of Australia. Traders currently assign a 77% probability to the Fed leaving rates unchanged at its October 27-28 meeting, down from 51% a month ago, and are pricing in cumulative rate hikes of about 75 basis points by the end of 2027.
Investors have largely dismissed bets on an imminent Fed rate hike following statements from two central bank officials suggesting more evidence is needed before deciding on further monetary tightening. Fed Governor Christopher Waller stated that inflation expectations remain "well anchored." Richmond Fed President Thomas Barkin and Fed Vice Chair for Supervision Michelle Bowman are scheduled to participate in separate events, while European Central Bank President Christine Lagarde is expected to speak multiple times at the ongoing International Monetary Fund and World Bank annual meetings in Bangkok.
Mentioned
